1) The control environment in an internal control structure is the attitude and awareness
of internal control by all employees.
2) When a new partner is admitted to a partnership, bonuses attributable to either the
old partnership or to the incoming partner may be recognized in accordance with the
agreement among the partners.
3) The variance from standard for factory overhead resulting from incurring a total
amount of factory overhead cost that is greater or less than the amount budgeted for the
level of operations achieved is termed controllable variance.
4) If a business issued bonds payable in exchange for land, the transaction would be
reported in a separate schedule on the statement of cash flows.
5) If the perpetual inventory system is used, an account entitled Cost of Merchandise
Sold is included in the general ledger.
6) Generally, all deductions made from an employee’s gross pay are required by law.
7) Under the periodic inventory system, a physical inventory is taken to determine the
cost of the inventory on hand and the cost of the merchandise sold.
8) There is no difference in the Investing and Financing sections of the statement of
cash flows using the indirect and direct method.
9) Ideal standards are developed under conditions that assume no idle time, no machine
breakdowns, and no materials spoilage.
10) The process by which management plans, evaluates, and controls long-term
investment decisions involving fixed assets is called capital investment analysis.
11) A consignor who has goods out on consignment with an agent should include the
goods in ending inventory even though they are not in the possession of the consignor.
12) Merchandise Inventory normally has a debit balance.
13) The double-declining-balance method is an accelerated depreciation method.
14) The minimum amount of desired divisional income from operations is set by top
management by establishing a minimum rate of return considered acceptable for
invested assets.
15) A credit balance in which of the following accounts would indicate a likely error?
A.Fees Earned
B.Salary Expense
C.Janet James, Capital
D.Accounts Payable
16) During September, Excom sold 100 radios for $50 each. Each radio cost Excom
$30 to purchase, and carried a two-year warranty. If 5% of the goods sold typically need
to be replaced over the warranty period and one is actually replaced during September,
for what amount in September would Excom debit Product Warranty Expense?
A.$50
B.$150
C.$30
D.$120
17) The Warbler Jeans Company produces two different types of jeans. One is called
the Simple Life and the other is called the Fancy Life The companys Production Budget
requires 353,500 units of Simple jeans and 196,000 Fancy jeans to be manufactured. It
is estimated that 2.5 direct labor hours will be needed to manufacture one pair of
Simple Life jeans and 3.75 hours of direct labor hours for each pair of Fancy Life jeans.
What is the total number of direct labor hours needed for both lines of jeans?
A.883,750 direct labor hours
B.1,618,750 direct labor hours
C.735,000 direct labor hours
D.353,500 direct labor hours
18) On July 1st, Hartford Construction purchases a bulldozer for $228,000. The
equipment has a 9 year life with a residual value of $16,000. Hartford uses
units-of-production method depreciation and the bulldozer is expected to yield 26,500
operating hours.
(a) Calculate the depreciation expense per hour of operation.
(b) The bulldozer is operated 1,250 hours in the first year, 2,755 hours in the second
year, and 1,225 hours in the third year of operations. Journalize the depreciation
expense for each year.
19) The units of an item available for sale during the year were as follows:
There are 50 units of the item in the physical inventory at December 31. The periodic
inventory system is used. Determine the ending inventory cost by (a) the first-in,
first-out method, (b) the last-in, first-out method, and (c) the average cost method.
Show your work.
20) Liabilities are reported on the
A.income statement
B.statement of owner’s equity
C.statement of cash flows
D.balance sheet
21) Radley and Smithers share income and losses in a 2:1 ratio after allowing for
salaries to Radley of $48,000 and $60,000 to Smithers. Net income for the partnership
is $96,000. Income should be divided as follows:
A.Radley, $48,000; Smithers, $48,000
B.Radley, $56,000; Smithers, $40,000
C.Radley, $64,000; Smithers, $32,000
D.Radley, $40,000; Smithers, $56,000
22) A $140 petty cash fund has cash of $20 and receipts of $117. The journal entry to
replenish the account would include a credit to
A.Cash for $20
B.Cash Over and Short for $3
C.Petty Cash for $120
D.Cash for $120
23) At the beginning of the period, the Cutting Department budgeted direct labor of
$155,000, direct material of $165,000 and fixed factory overhead of $15,000 for 9,000
hours of production. The department actually completed 10,000 hours of production.
What is the appropriate total budget for the department, assuming it uses flexible
budgeting?
A.$416,000
B.$370,556
C.$368,889
D.$335,000
24) When preparing the statement of owner’s equity, the beginning capital balance can
always be found
A.in the Income Statement columns of the work sheet
B.in the statement of cash flows
C.in the general ledger
D.in the Balance Sheet columns of the work sheet
25) Which of the following below is not one of the four major forms of business entities
that are discussed in this chapter?
A.Sole proprietorship
B.Corporation
C.Partnership
D.Subchapter S corporation
26) The following data are taken from the balance sheet at the end of the current year.
Determine the (a) working capital, (b) current ratio, and (c) quick ratio. Present figures
used in your computations. Round ratios to the nearest tenth.
27) Which of the following should be deducted from net income in calculating net cash
flow from operating activities using the indirect method?
A.depreciation expense
B.gain on sale of land
C.a loss on the sale of equipment
D.dividends declared and paid
28) What is the normal balance of the following accounts?
a. Sales Tax Payable
b. Merchandise Inventory
c. Delivery Expense
d. Cost of Merchandise Sold
e. Sales Returns and Allowance
f. Sales Discounts
g. Sales
29) Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year
(before adjustment), and bad debt expense is estimated at 3% of net credit sales. If net
credit sales are $300,000, the amount of the adjusting entry to record the estimated
uncollectible accounts receivables is
A.$8,500
B.$8,500
C.$9,000
D.Cannot be determined
30)
Based on the above data, what is the amount of quick assets?
A.$168,000
B.$96,000
C.$60,000
D.$61,000
31) Land costing $140,000 was sold for $173,000 cash. The gain on the sale was
reported on the income statement as other income. On the statement of cash flows, what
amount should be reported as an investing activity from the sale of land?
A.$173,000
B.$140,000
C.$313,000
D.$33,000
32) The Lucy Corporation purchased and used 129,000 board feet of lumber in
production, at a total cost of $1,548,000. Original production had been budgeted for
22,000 units with a standard material quantity of 5.7 board feet per unit and a standard
price of $12 per board foot. Actual production was 23,500 units.
Compute the material quantity variance.
A.63,000F
B.63,000U
C.59,400F
D.59,400U
33) The following data is given for the Stringer Company:
Overhead is applied on standard labor hours.
The direct material quantity variance is:
A.22,800F
B.22,800U
C.52,000F
D.52,000U
34) If one company owns more than 50% of the common stock of another company
A.a partnership exists
B.a parentsubsidiary relationship exists
C.the company whose stock is owned must be liquidated
D.the cost method should be used to account for the investment
35) Once the adjusting entries are posted, the Adjusted Trial Balance is prepared to
A.verify that the debits and credits are in balance
B.verify that the net income correctly flows into the statement of owners equity from
the income statement
C.verify that the net income (loss) is correct for the period
D.verify the correct flow of accounts into the financial statements
36) Work in process inventory on December 31, 2011, is $44,000. Work in process
inventory increased by 60% during 2011. Cost of goods manufactured for 2011
amounts to $275,000. What are the total manufacturing costs incurred in 2011?
A.$291,500
B.$302,000
C.$275,750
D.$233,750
37) Assuming a 360-day year, when a $30,000, 90-day, 5% interest-bearing note
payable matures, total payment will amount to:
A.$31,500
B.$1,500
C.$30,375
D.$375
38) Hamlin Corporation had $220,000 in invested assets, sales of $242,000, income
from operations amounting to $70,400, and a desired minimum rate of return of 3%.
The rate of return on investment for Hamlin is:
A.7%
B.32%
C.3%
D.29%
39) From the following list of accounts taken from Lamars accounting records, identify
those that would appear on the Income Statement.
(a) Rent Expense
(b) Land
(c) Capital
(d) Fees Earned
(e) Withdrawal
(f) Wages Expense
(g) Investment
40) Using the allowance method of accounting for uncollectible receivables, the entry
to reinstate a specific receivable previously written off would include a
A.credit to Bad Debt Expense
B.credit to Accounts Receivable
C.debit to Allowance for Doubtful Accounts
D.debit to Accounts Receivable
41) Which of the following would be subtracted from the balance per books on a bank
reconciliation?
A.Outstanding checks
B.Deposits in transit
C.Notes collected by the bank
D.Service charges
42) Journalize the five transactions for Mirmax Rentals described below.
43) Why would you compare or not compare Coca-Cola and Pepsi-Cola (PepsiCo) as
companies to each other?
44) The following are the current assets from Hanes Co. as of December 31, 2014:
Prepare the current asset section of the balance sheet.
45) List five internal controls that relate directly to payroll.
46) During the taking of its physical inventory on December 31, 2011, Gentry Supplies
Company incorrectly counted its inventory as $245,000 instead of the correct amount of
$254,000. Indicate the affect of the misstatement on Gentry Supplies Companys
balance sheet and income statement for the year ended December 31, 2011
47) Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45.
The cost of the merchandise sold is $24,500. Abbey Co. issued a credit memo for
$3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the
invoice within the discount period. What is the amount of gross profit earned by Abbey
Co. on the above transactions?
48) Benson contributed land, inventory, and $22,000 cash to a partnership. The land had
a book value of $65,000 and a market value of $111,000. The inventory had a book
value of $60,000 and a market value of $58,000. The partnership also assumed a
$52,000 note payable owned by Benson that was used originally to purchase the land.
Required:
Provide the journal entry for Bensons contribution to the partnership.
49) Indicate whether the following actions would (+) increase, (-) decrease, or (0) not
affect a company’s total assets, liabilities, and stockholders’ equity.
